REDtone 2008 Annual Report

REDTONE INTERNATIONAL BERHAD 596364-U ANNUAL REPORT 2008 22-30

Notice of Annual General Meeting 2Statement Accompanying Notice of Annual General Meeting 4Corporate Information 5Corporate Structure 6Board of Directors 7Profile of Board of Directors 8Chairman’s Letter to Shareholders 11Group Managing Director’s Letter to Shareholders 12Corporate Governance Statement 14Additional Compliance Information 20Audit Committee Report 23Statement of Internal Control 29Statement of Directors’ Interests 32Statement on Directors’ Responsibility 33Directors’ Report 34Statement by Directors 38Statutory Declaration 38Independent Auditors’ Report 39Income Statements 41Balance Sheets 42Statements of Changes In Equity 44Cash Flow Statements 47Notes to The Financial Statements 50List of Properties 111Analysis of Shareholdings 113Proxy Form Enclosed

Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Sixth Annual General Meeting of the Company will be held at The Ballroom, Mezzanine Level, Hotel Equatorial, Jalan Sultan Ismail, 50250 Kuala Lumpur on Monday, 10 November 2008 at 10.00 a.m. for the following purposes: AGENDA 1. To receive and adopt the Statutory Financial Statements for the financial year ended Resolution 1 31 May 2008 together with the Reports of the Directors and Auditors thereon. Resolution 2 2. To approve the payment of the Directors’ fees amounting to RM132,000 in respect of the financial year ended 31 May 2008. 3. To re-elect the following Directors who retire in accordance with Article 85 of the Company’s Articles of Association and, being eligible, offer themselves for re- election: (a) Mr. Mathew Thomas a/l Vargis Mathews Resolution 3 (b) En. Shaifubahrim bin Mohd Saleh Resolution 4 4. To re-elect the following Directors who retire in accordance with Article 92 of the Company’s Articles of Association and, being eligible, offer themselves for re- election: (a) Mr. Cheang Kwan Chow Resolution 5 (b) Mr. Lau Bik Soon Resolution 6 (c) Dato’ Suriah Abd Rahman Resolution 7 5. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise Resolution 8 the Directors to fix their remuneration. 6. To transact any other ordinary business of which due notice shall be given. AS SPECIAL BUSINESS: To consider and if thought fit, to pass the following resolutions as Ordinary Resolution 9 7. Resolution: Allotment of Shares Pursuant to Section 132D of the Companies Act, 1965 “THAT subject always to the Companies Act, 1965 and the approvals of the regulatory authorities, the Directors be and are hereby empowered pursuant to Section 132D of the Companies Act, 1965 to issue shares in the Company, at any time and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being and that the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.” 8. Proposed Issue of Options to Dato’ Suriah Abd Rahman Resolution 10 “THAT, the Board of Directors of the Company be and is hereby authorized at any time, and from time to time, to offer and to grant to Dato’ Suriah Abd Rahman, being the Independent Non-Executive Director of the Company, options to subscribe for such number of new ordinary shares of RM0.10 each in the Company (“REDtone Shares”) to be allocated to her under the Employee Share Option Scheme (“Scheme”), provided always that:

Notice of Annual General Meeting (i) not more than 50% of the new REDtone Shares available under the Scheme shall be allocated, in aggregate, to the Directors and senior management of the Company and its subsidiaries; and (ii) not more than 10% of the new REDtone Shares available under the Scheme shall be allocated to her, if she, either singly or collectively through persons connected with her, holds 20% or more of the issued and paid-up capital of the Company, and subject always to such terms and conditions and/or any adjustments which may be made in accordance with the provisions of the By-Laws of the Scheme.BY ORDER OF THE BOARDREDTONE INTERNATIONAL BERHADYeap Kok Leong (MAICSA No. 0862549)Wong Wai Foong (MAICSA No. 7001358)Company SecretariesKuala LumpurDated: 20 October 2008Notes:1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint not more than two (2) proxies to attend and vote at the same meeting and the appointment shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.2. A proxy may but need not be a Member or a qualified legal practitioner or an approved company auditor or a person approved by the Registrar.3. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney authorised in writing or, if the appointer is a corporation, either under the corporation’s common seal or under the hand of an officer or attorney duly authorised. 4. Where a member is an authorised nominee as defined under the Central Depositories Act, it may appoint one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.5. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a duly notarised certified copy of that power or authority, shall be deposited at the Registered Office of the Company at Level 18,The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia not less than forty-eight (48) hours before the time appointed for holding the meeting or any adjourned meeting at which the person named in the instrument proposes to vote, and in the case of a poll, not less than forty-eight (48) hours before the time appointed for the taking of the poll, and in default, the instrument of proxy shall not be treated as valid.Explanatory Notes on Special Business:-1. Section 132D of the Companies Act, 1965 In accordance with the Companies Act, 1965, the Directors would have to call a general meeting to approve the issue of new shares even though the number of shares involved is less than 10% of the issued capital. In order to avoid any delay and cost involved in convening such a general meeting, it is considered appropriate to seek the shareholders’ approval for the Directors to issue shares in the Company up to an aggregate amount not exceeding 10% of the issued share capital of the Company for the time being.This authority, unless revoked or varied at a general meeting, will expire at the next Annual General Meeting of the Company.2. Proposed Issue of Option to Dato’ Suriah Abd Rahman In accordance with the Listing Requirements of Bursa Malaysia Securities Bhd for the Mesdaq Market, to seek the shareholders’ approval to enable Dato’ Suriah Abd Rahman, an Independent Non-Executive Director to participate in the Employees’ Share Option Scheme of the Company.

Statement Accompanying Notice of Annual General Meeting Pursuant to Paragraph 9.28(1) of the Listing Requirements of Bursa Malaysia Securities Berhad for the MESDAQ Market 1. Directors standing for re-election or re-appointment (a) The Directors retiring by rotation and standing for re-election pursuant to Articles 85 of the Articles of Association of the Company are as follows: • Mr Mathew Thomas a/l Vargis Mathews • Encik Shaifubahrim bin Mohd Saleh (b) The Director seeking for re-election pursuant to Article 92 of the Articles of Association of the Company is as follows: • Mr. Cheang Kwan Chow • Mr. Lau Bik Soon • Dato’ Suriah Abd Rahman The profiles of the above Directors are set out in the section entitled “Profile of Directors” on pages 8 to 10 of the Annual Report. Their shareholdings in the Company are set out in the section entitled “Statement of Directors’ Interests” on page 32 of the Annual Report. 2. Board Meetings held in the financial year ended 31 May 2008 A total of nine Board Meetings were held in the financial year ended 31 May 2008. The details of the attendance of Directors at the Board Meetings held in the financial year ended 31 May 2008 are disclosed on page 16 of the Annual Report. 3. Date, Time and Venue of the Annual General Meeting The Sixth Annual General Meeting of the Company will be held as follows: Date: Monday, 10 November 2008 Time: 10.00 a.m. Venue: The Ballroom, Mezzanine Level, Hotel Equatorial, Jalan Sultan Ismail, 50250 Kuala Lumpur.

Corporate InformationBOARD OF DIRECTORS REGISTRARDato’ Larry Gan Nyap Liou @ Gan Nyap Liow Tenaga Koperat Sdn Bhd Level 17, The Gardens North Tower(Chairman/Independent Non-Executive Director) Mid Valley CityWei Chuan Beng Lingkaran Syed Putra(Managing Director) 59200 Kuala LumpurZainal Amanshah bin Zainal Arshad Telephone no.: 03-2264 3883(Group Chief Executive Director) Facsimile no.: 03-2282 1886Lau Bik Soon(Executive Director) PRINCIPAL BANKERSCheang Kwan Chow HSBC Bank Malaysia Berhad(Non-Independent Non-Executive Director)Mathew Thomas A/L Vargis Mathews NOMINATION COMMITTEE(Independent Non-Executive Director) Dato’ Larry Gan Nyap Liou @ Gan Nyap LiowShaifubahrim bin Mohd Saleh(Independent Non-Executive Director) (Chairman/Independent Non-Executive Director)Dato’ Suriah Abd Rahman Cheang Kwan Chow (Independent Non-Executive Director) (Member/Non-Independent Non-Executive Director) Mathew Thomas A/L Vargis MathewsAUDIT COMMITTEE (Member/Independent Non-Executive Director)Mathew Thomas A/L Vargis Mathews Shaifubahrim bin Mohd Saleh (Member/Independent Non-Executive Director)(Chairman/Independent Non-Executive Director)Cheang Kwan Chow REMUNERATION COMMITTEE(Member/Non-Independent Non-Executive Director) Dato’ Larry Gan Nyap Liou @ Gan Nyap LiowShaifubahrim bin Mohd Saleh(Member/Independent Non-Executive Director) (Chairman/Independent Non-Executive Director) Cheang Kwan ChowCOMPANY SECRETARY (Member/Non-Independent Non-Executive Director)Yeap Kok Leong (MAICSA No. 0862549) Mathew Thomas A/L Vargis MathewsWong Wai Foong (MAICSA No. 7001358) (Member/Independent Non-Executive Director)Level 18, The Gardens North Tower, Shaifubahrim bin Mohd SalehMid Valley City, (Member/Independent Non-Executive Director)Lingkaran Syed Putra,59200 Kuala Lumpur AUDITORSTelephone no.: 03-2264 8888 Ernst & YoungFacsimile no.: 03-2282 2733 Chartered AccountantsREGISTERED OFFICE LISTINGLevel 18, The Gardens North Tower MESDAQ Market of the Bursa Malaysia Securities BhdMid Valley City Stock Name : REDTONELingkaran Syed Putra Stock Code : 003259200 Kuala LumpurTelephone no.: 03-2264 8888 Facsimile no.: 03-2282 2733HEAD OFFICESuite 22-30, 5th FloorIOI Business Park47100 PuchongSelangor Darul EhsanTelephone no.: 03-8073 2288Facsimile no.: 03-8073 7940Website: www.redtone.comE-mail: [email protected]

Corporate Structure as at 26 September 2008

Board of Directors1. Dato’ Larry Gan Nyap Liou @ Gan Nyap Liow 4 5 6 7 8 (Chairman/Independent Non-Executive Director) 2 1 32. Wei Chuan Beng (Managing Director)3. Zainal Amanshah bin Zainal Arshad (Group Chief Executive Director)4. Lau Bik Soon (Executive Director)5. Cheang Kwan Chow (Non-Independent Non-Executive Director)6. Shaifubahrim bin Mohd Saleh (Independent Non-Executive Director)7. Dato’ Suriah Abd Rahman (Independent Non-Executive Director8. Mathew Thomas A/L Vargis Mathews (Independent Non-Executive Director)

Profile of Board of DirectorsDATO’ LARRY GAN NYAP LIOU @ WEI CHUAN BENGGAN NYAP LIOW DATO’ LARRY GAN NYAP LIOU @ GAN NYAP LIOW Chairman/Independent Non-Executive Director Dato’ Larry Gan, aged 53, a Malaysian, is the Chairman and was appointed to the Board of Directors of the Company on 1 June 2006. Dato’ is a Chartered Accountant and Certified Management Consultant. Dato’ Larry Gan retired in December 2004 from the global Accenture organization, the world’s largest management and technology consulting services firm. He spent 26 years with the firm, 16 as Partner, and had many global leadership roles. He was Managing Partner – Malaysia from 1989 to 2004, Managing Partner – ASEAN 1993 to 1996, Managing Partner – ASIA 1997 to 1999 and Managing Partner, Corporate Development, ASIA PACIFIC, 1999 to 2002. He also managed the firm’s multi billion dollar Venture Fund in Asia Pacific. Between 1997 and 2004, he was a member of the Global Management Council, and sat on the many global management committees governing partner admission, rewards and compensation. Dato’ Larry Gan is the Chairman for Cuscapi Berhad (“Formerly known as Datascan Berhad”), a Board Member of Tanjong Plc,AmBank (M) Berhad,Tien Wah Press Holdings Berhad and AMDB Berhad. He is also on the board of Minority Shareholders Watchdog Group and the British Malaysia Chamber of Commerce. He has served as Chairman of Association of Computer Industry Malaysia (PIKOM) and the Vice-President of the Association of Asian Oceania Computer Industry Organization and a Member of the Minister of Science & Technology Think Tank, Copyright Tribunal, and the Labuan International Financial Exchange Committee. Dato’ Larry Gan is the Chairman of the Nomination Committee and Remuneration Committee of the Company. He attended seven out of nine Board Meetings held during the financial year ended 31 May 2008. WEI CHUAN BENG Managing Director Mr. Wei Chuan Beng, aged 43, a Malaysian, is the Managing Director and was appointed to the Board of Directors of the Company on 15 November 2003. He obtained his Bachelor’s Degree in Electrical Engineering from University Technology Malaysia in 1989 and Diploma in Management (Gold Medalist Award Winner) from Malaysia Institute of Management, Kuala Lumpur in 1995. He also completed an Entrepreneur Development Program from the renowned MIT Sloan School of Management in USA in January 2006. He began his career with Hewlett Packard Sales Malaysia Sdn Bhd in 1989 as System Engineer responsible for IT technical and customer relation and was subsequently promoted to Major Account Manager. Having gained the wide exposure in information technology, electronics and telecommunications industry, he began his entrepreneur pursuit by establishing a software development and system integration company, TQC Consultants (IT Division) Sdn Bhd (“TQC”) in 1995 until 1996 when it was discontinued when REDtone became active in 1997. At TQC, he managed to grow a company with limited resources to increase shareholders’ value and developed marketing strategies for different product lines. He started REDtone Telecommunications Sdn Bhd in 1996 with two other partners. As one of the founding members of the RIB Group, he is instrumental in shaping the Group’s business relations and policies. His main responsibilities include management of the Group’s overall business, expanding its overseas markets and financial-related matters. At present, he is the Deputy Chairman for the Association of the Computer & Multimedia Malaysia (PIKOM) and the Education Chair person for the exclusive Young Presidents’ Organization (YPO) and a Member of National Broadband Plan Committee in Malaysia. Except for certain recurrent related party transactions of revenue or trading nature which are necessary for day-to-day operations of the subsidiaries and for which Mr. Wei Chuan Beng is deemed to be interested as disclosed under pages 20 and 21 of the Annual Report, there are no other business arrangement with the Company in which he has personal interest. Mr. Wei attended eight out of nine Board Meetings held during the financial year ended 31 May 2008.

Profile of Board of DirectorsZAINAL AMANSHAH BIN ZAINAL LAU BIK SOON CHEANG KWAN CHOWARSHADZAINAL AMANSHAH BIN ZAINAL ARSHADGroup Chief Executive OfficerEn. Zainal Amanshah bin Zainal Arshad, aged 42, a Malaysian, is the Group Chief Executive Officer andwas appointed to the Board of Directors of the Company on 15 November 2003. He obtained his Bachelor’sDegree in Electrical Engineering from University of Kent, UK in 1989. Prior to joining REDtone, he worked forseveral local and multinational companies including NCR Malaysia Sdn Bhd, Solsis (M) Sdn Bhd, XylogBusiness Solutions Sdn Bhd and Lotus Consulting Malaysia. In 2000, he joined REDtone TelecommunicationsSdn Bhd as Executive Director responsible for the call centre and computer technology system andsubsequently responsible for the discounted call business for the Malaysia market. He is currently primarilyresponsible for the Malaysia business and he sits on the board of eB Capital Berhad. He represents REDtoneTelecommunications Sdn Bhd as Deputy Chairman of ASP Association (Protem).He attended all nine Board Meetings held during the financial year ended 31 May 2008.LAU BIK SOONExecutive DirectorMr. Lau Bik Soon, aged 37, a Malaysian, is the Executive Director and was appointed to the Board of Directorsof the Company on 13 August 2008. He obtained his First Class Honours Degree in Electrical Engineeringfrom University of Technology Malaysia. Prior to joining REDtone, he was the Country Manager for HitachiData Systems Malaysia. Under his leadership, he has strengthened the organization and company’schannel partner, and helped the company grow its business in Malaysia.He also brings to REDtone more than 12 years’ of experience in the ICT industry and in-depth understandingof the requirements of most organisations in Malaysia, be it small, medium or large enterprises. He hasheld numerous key positions including Sales Director, Partner Sales Manager, Enterprise Division AccountManager, Business Development Manager, Systems Engineer and R&D Engineer with organizations such asCisco Systems, Sun Microsystems, Compaq Computer,TQC Consultant (IT Division) Sdn Bhd and MotorolaPenang.During his tenure with these organizations, he has attained various partner management excellenceawards and has also won many accolades as a high achiever in sales.CHEANG KWAN CHOWNon-Independent Non-Executive DirectorMr. Cheang Kwan Chow, aged 55, a Malaysian, is the Non-Independent Non-Executive Director of theCompany and was appointed to the Board of Directors of the Company on 22 July 2008. He obtainedhis Master of Arts Communications Management from University of South Australia, Adelaide in 1999,Postgraduate Diploma in Export Marketing, Diploma in Export from Buckinghamshire College, England in1978 and Diploma in Marketing from the Institute of Marketing (Cookham), United Kingdom in 1976. He is amember of the Chartered Institute of Arbitrators, London, United Kingdom and sits on the Panel of Arbitratorsof The Palm Oil Refiners Association of Malaysia. He joined the Kuok Group of companies in 1980 and hadover the years, held various senior management positions in Malaysia and Singapore.Presently, he sits on the board of PPB Group Berhad and a Deputy Chairman of Malayan SugarManufacturing Company Berhad.Mr. Cheang is also a member of the Audit Committee, the Nomination Committee and RemunerationCommittee of the Company.

Profile of Board of Directors MATHEW THOMAS A/L VARGIS SHAIFUBAHRIM BIN MOHD DATO’ SURIAH ABD RAHMAN MATHEWS SALEH10 MATHEW THOMAS A/L VARGIS MATHEWS Independent Non-Executive Director Mr. Mathew Thomas A/L Vargis Mathews, aged 53, a Malaysian, is the Independent Non-Executive Director of the Company and was appointed to the Board of Directors of the Company on 15 November 2003. He obtained his Chartered Association of Certified Accountants (UK) qualification from London in 1985. He is currently a Fellow of the Chartered Association of Certified Accountants, UK. He began his career in a small audit practice and after qualifying, joined Ernst & Whinney (now known as Ernst & Young) in 1987. In 1990, he left to start up his own audit and accounting practice and is currently the Managing Partner of Mathew & Partners, Chartered Accountants. He is an approved Company Auditor licensed by the Ministry of Finance. Currently, he sits on the boards of several private limited companies in Malaysia including Mathew & Partners Consulting Sdn Bhd, Westar Corporation Sdn Bhd and Ultimate Class Sdn Bhd. He is also a member of the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Taxation. He is also the President of Kiwanis, Titiwangsa Division and the Auditor of the Kiwanis Malaysian District. Mr. Mathew Thomas is the Chairman of the Audit Committee. He is also a member of the Nomination Committee and Remuneration Committee of the Company. He attended all nine Board Meetings held during the financial year ended 31 May 2008. SHAIFUBAHRIM BIN MOHD SALEH Independent Non-Executive Director En. Shaifubahrim bin Mohd Saleh, aged 49, a Malaysian, is the Independent Non-Executive Director of the Company and was appointed to the Board of Directors of the Company on 15 November 2003. He obtained his Bachelor Degree in Computer Science, University Sains Malaysia in 1983. He has been in the IT industry for the last 24 years. He began his career as a marketing representative at IBM Malaysia before joining Logica Plc in 1988. Subsequently, he was attached to Oracle System and Data General before serving Banyan Systems, Asia Region as Managing Director. He was appointed as Managing Director of Aironet Wireless Communication Inc. in 1999. Subsequently, after the acquisition of Aironet by Cisco System Inc., in 2000, he was appointed as the Managing Director of Cisco System (Malaysia) Sdn Bhd. Currently, he sits on the board of eB Capital Berhad and several private limited companies. He is also currently an advisor and chairman of Export Promotion to Persatuan Industri Komputer dan Multimedia Malaysia, PIKOM, a council member of the Penang State IT Council. En. Shaifubahrim is also a member of the Audit Committee, the Nomination Committee and Remuneration Committee of the Company. He attended all nine Board Meetings held during the financial year ended 31 May 2008. DATO’ SURIAH ABD RAHMAN Independent Non-Executive Director Dato’ Suriah Abd Rahman, aged 58, a Malaysian, is the Independent Non-Executive Director of the Company and was appointed to the Board of Directors of the Company on 3 September 2008. She obtained her Bachelor of Arts (Honors) from University Malaya and Master of Arts from Leeds University, United Kingdom. She served under various capacities with the Government of Malaysia as Administrative and Diplomatic Officer (PTD) from 1972 to 2005. During this period, among the positions she held was as Deputy Director General, Implementation Coordination Unit, Prime Minister Department, Deputy Secretary General Ministry of Energy, Communications and Multimedia, and her last held position with the Government was as the Secretary General of Ministry of Science, Technology and Innovation. She served as advisor to the Minister of Science, Technology and Innovation from January to December 2006. From 2000 to 2004, she served in multiple capacities as Board Member and Alternate Director in organizations such as Bank Simpanan Nasional, Multimedia Development Corporation, Pos Malaysia Berhad and Telekom Malaysia. From 2004 to 2005, she served as Board Member in Malaysia Trade Development Corporation, MIMOS Berhad, Multimedia Development Corporation, SIRIM Berhad,Technology Park Malaysia, an Alternate Chairman in Malaysian Standard and Accreditation Council, a Commission Member in Malaysian Communications and Multimedia Commission and an Advisory Board in National Science Centre. Presently, she sits on the Board of Nine Bio Sdn Bhd and Universiti Putra Malaysia.

Chairman’s Letter to Shareholders “Our transformation into a full-service alternative communications provider is progressing well”. It’s not easy to tell shareholders that their company did not make a profit. For the first time, the Group recorded a loss after tax and after minority interest of RM6.80million for fiscal year 2008. This was mainly due to an increase in infrastructure costs, provision of diminution of investment in an associated company and unrealized foreign exchange losses for inter- company loans.On a positive note, amidst intense competition, we achieved revenue of RM109.99 million which is highercompared to the preceding year. This underlines the Group’s ability to offer services and products of highquality that continue to appeal to customers.We made good progress in repositioning the Group. I am happy to note that we are well on our way toestablishing ourselves as a communications company providing a full suite of core offerings around Data,Mobile, Voice and Content.We are very excited with the growth prospects in the Data business. We now already have several hundrednew customers using our Data services and there are clear signs that the customer base will increase.We see great potential in the Mobile and Content markets and our entry at this stage via several ventureswill place us in a good position to tap this potential.The global economy is presently going through a very trying period. The domestic market remains highlycompetitive. We will need to be prudent with our investments and use of resources but yet aggressive withpursuing the new positioning. Your Board and management understand fully the challenges ahead.I would like to take this opportunity to extend my appreciation to my fellow board members, the managementand all employees for their hard work and dedication.Thanks also to our shareholders, customers, businessassociates and partners for their continuous support and confidence in the Group.DATO’ LARRY GANChairman 11

Group Managing Director’s Letter to Shareholders “We are consolidating and aligning our operations as part of the remodeling process.” The telco industr y went through another challenging year which further reinforced the importance for us to maintain our innovativeness and ability to quickly adapt to changing market needs if we are to compete successfully in the marketplace. Our unwavering commitment in taking the Group to the next level as a telco provider with several core services yielded encouraging results in the 12 months under review. We grew our Data business in Peninsular Malaysia into a profitable one. The SMEs (small and medium-sized enterprises) and SMIs (small and medium- sized industries) that we are targeting clearly are looking for an alternative for their Data requirements and we have been able to meet their needs with our specially tailored packages. For East Malaysia, we went full steam with our preparations to bring our WiMAX service there ahead of the August 31, 2008 deadline set by the Malaysian Communications and Multimedia Commission. We subsequently rolled out REDtone WiMAX in Sabah on August 20, making us the first in the country to offer high speed wireless Internet access via WiMAX technology to the corporate and SME sectors in East Malaysia. We expect to extend our REDtone WiMAX offering to Sarawak by the end of 2008. After months of intense negotiation, we finally sealed our collaboration with Celcom to be a mobile virtual network operator or what is commonly referred to as MVNO.This initiative, our first under the Mobile business, will see us offering a wide range of mobile services such as SMS, MMS, GPRS and 3G to post-paid enterprise customers, a segment that we are particularly strong at. These services will be marketed under our REDtone brand. In the Voice segment, fierce competition amongst the players continued to affect our margins. Nonetheless, our ability to add value to our offerings together with exceptional customer service enabled us to maintain a very strong and loyal customer base for our Voice services. We teamed-up with Club Excellence (M) Sdn Bhd to form a joint-venture company where we have a 61% stake to expand into Internet TV. Marketed under the DETV brand, it signaled the start of our Content business. DETV offers an alternative channel for consumers to enjoy non-stop entertainment on their TV via broadband Internet connection and a simple Internet home gateway. We recognized the need to consolidate our operations to ensure we remain on track in rebuilding our business.Towards this end, we undertook a share swap deal where we exchanged our 100% stake in VMS Technology Limited for a 19.5% equity in Hotgate Technology Inc, an Internet-enabled service provider. Hotgate Technology Inc is listed on the OTCBB (Over-The-Counter Bulletin Board) in the US. We ceased our TravelFon operations due to a change in market conditions which no longer made the business viable. Of significance is our proposal to inject our Data business into eB Technologies (M) Sdn Bhd, a wholly- owned subsidiary of eB Capital Bhd. This will enable our Data business to fully realize its potential as eB is licenced to operate the 2.5GHz and 3.5GHz broadband spectrums. In return, we will increase our stake in eB from the current 23.17% to become a major shareholder with over 60%. Looking ahead, we have identified the Data and Content businesses as growth areas that can provide us with long-tail revenue stream. The Data market is set to continue growing and we are eager to have a slice of this pie as we are now in a position to offer a comprehensive suite of Data solutions.12

Group Managing Director’s Letter to ShareholdersThe government’s push for a higher broadband penetration in the country coupled with an increasingnumber of homes subscribing to broadband service will augur well for DETV.We will continue to innovate as this is crucial to our success in the future. Besides carrying out R&Dactivities as planned, we also created an innovation framework.This framework provides a platform for ouremployees and business partners to contribute their ideas and will continue to assist us as we sharpenour competitive edge in this area. For financial year ended 31 May 2008, the Group spent approximatelyRM2.26million on R&D.On our overseas operations, we are taking a cautious position as our focus is to first strengthen our operationsin Malaysia. In China, we will continue to build on our e-commerce and Data businesses while for Pakistan,we will continue to seek out investors who will be able to add value to our business in the republic.As and when we see a need to further consolidate our operations, we will do so.I would like to conclude by saying a big thank you to all our shareholders and everyone who supportedus as we remodel the Group to make it stronger.WEI CHUAN BENGGroup Managing Director 13

Corporate Governance Statement The Board of Directors (“Board”) of REDtone International Berhad appreciates the importance of embedding corporate governance best practices in the business and affairs of the Company and the Group and views corporate governance as synonymous with transparency, accountability and outstanding corporate performance.The Board is fully committed to sustaining its high standards of corporate governance with the goal of ensuring that the Group is in the forefront of good governance and is recognised as an exemplary organisation in this respect by further supporting and implementing the prescriptions of the Principles and Best Practices set out in Parts 1 and 2 of the Malaysian Code on Corporate Governance (“Code”). In October 2007, the Code was revised in line with developments in the domestic and international capital markets, to further improve corporate governance standards and strengthen investor confidence.The key amendments to the Code are aimed at strengthening Board of Directors and the Audit, Remuneration and Nomination Committees, and ensuring their roles and responsibilities are discharged effectively. The Board will ensure that the changes are adequately reflected and updated in the Terms of Reference of the Audit, Remuneration and Nomination Committees and the Board endeavours to adequately reflect all changes by the require deadline in 2009. Statement of Principles The following sets out the manner in which the Principles in Part 1 of the Code have been applied by the Company and are under the headings of Board of Directors, Directors’ Remuneration, Shareholders and Investors, and Accountability and Audit. A. BOARD OF DIRECTORS Board Responsibilities The Company is led and controlled by an effective Board that has the overall responsibility to protect and enhance shareholder value.The Company acknowledges the pivotal role played by the Board of Directors in the stewardship of its strategic business direction and ultimately in the enhancement of its long-term shareholder value. Key responsibilities of the Board include the primary responsibilities prescribed under the Best Practices Provision AA I in Part 2 of the Code. The Board remains resolute and upholds its responsibility in governing, guiding and monitoring the direction of the Company with the eventual objective of enhancing long term sustainable value creation aligned with shareholders’ interests whilst taking into account the long term interests of all stakeholders, including shareholders, employees, customers, business associates and the communities in which the Group conducts its business. The Board assumes responsibility for the following matters: • Reviewing and adopting a corporate strategy for the Group • Succession planning including appointing, training and monitoring management • Developing and implementing an effective public communications program for the Group • Reviewing the adequacy and integrity of the Group’s internal control systems and management information systems, including system for compliance with applicable laws, regulations, rules, directives and guidelines • Developing an effective framework for identifying and monitoring significant business risks Board Committees The Board of Directors delegates certain responsibilities to the Board Committees, namely the Audit Committee, Nomination Committee, and Remuneration Committee in order to enhance business and operational efficiencies as well as efficacies.14

Corporate Governance StatementA. BOARD OF DIRECTORS (Cont’d) Board Committees (Cont’d) All Board Committees have written terms of reference and charters and the Board receives all minutes and reports of their proceedings and deliberations, where relevant. The Chairmen of the various Committees report to the Board on the outcome of Committee meetings. Such reports are usually incorporated in the minutes of the full Board meetings. Board Composition and Balance The Board consists of a total of eight (8) Directors and the status of their directorship is as follows: DIRECTOR STATUS Dato’ Larry Gan Nyap Liou @ Gan Nyap Liow Non Executive (Chairman of Board) Mr. Wei Chuan Beng Independent (Managing Director) Executive Encik Zainal Amanshah bin Zainal Arshad (Group Chief Executive Officer) Non Independent Mr. Peter Yeow Heng Ho Executive (retired w.e.f. November 23, 2007) Mr. Leong Yew Weng Non Independent (resigned w.e.f. September 21, 2007) Executive Mr. Tan Gee Sooi (appointed w.e.f. September 21, 2007 and resigned w.e.f. July 22, 2008) Non Independent Mr. Mathew Thomas A/L Vargis Mathews Non Executive Encik Shaifubahrim bin Mohd. Saleh Non Independent Non Executive Mr. Cheang Kwan Chow (appointed w.e.f. July 22, 2008) Non Independent Mr. Lau Bik Soon Non Executive (appointed w.e.f. August 13, 2008) Independent Dato’ Suriah Abd Rahman Non Executive (appointed w.e.f. September 3, 2008) Independent Non Executive Non Independent Executive Non Independent Non Executive Independent REDtone International Berhad complies with the Bursa Malaysia Listing Requirements with regard to board composition and the required ratio of independent directors. The profiles of the directors are set out on pages 8 to 10 of this Annual Report. The roles of the Chairman and the Managing Director are segregated and clearly defined by their individual position descriptions. The Chairman is responsible for running the Board and ensures that all directors receive sufficient and relevant information on financial and non-financial matters to enable them to participate actively in Board decisions. The Managing Director is responsible for the day-to-day management of the business as well as the implementation of Board policies and decisions. The Board will, from time to time, review its composition and size to ensure it fairly reflects the investments of the shareholders of the Company. Re-election of Directors An election of directors will take place at each Annual General Meeting whereby one-third of the directors shall retire from office and being eligible offer themselves for re-election. This provides an opportunity for shareholders to renew their mandate. New directors appointed by the Board are subject to election by the shareholders at the next Annual General Meeting following their appointments. 15

Corporate Governance Statement Meetings During the financial year ended 31 May 2008, the Board met on nine (9) occasions, deliberating upon and considering a variety of matters including the Group’s financial results, major investments, strategic decisions and the overall direction of the Group. Agenda and matters for discussion are prepared and circulated in advance of each meeting. All proceedings from Board meetings are recorded and the minutes maintained by the Company Secretary. During the financial year under review the Board meetings were held as follows: 2007 – June 27, July 30, September 27, October 5, 11 and 29 2008 – January 30, March 24 and April 28 Details of Directors attendance at meetings of the Board during the financial year under review are as follows: DIRECTOR ATTENDANCE Dato’ Larry Gan Nyap Liou @ Gan Nyap Liow 7/9 Mr. Wei Chuan Beng 8/9 Encik Zainal Amanshah bin Zainal Arshad 9/9 Mr. Peter Yeow Heng Ho (retired November 23, 2007) 1/6 Mr. Leong Yew Weng (resigned September 21, 2007) 2/2 Mr. Tan Gee Sooi (appointed w.e.f. September 21, 2007 and 6/7 resigned w.e.f. July 22, 2008) Mr. Mathew Thomas A/L Vargis Mathews 9/9 Encik Shaifubahrim bin Mohd. Saleh 9/9 Mr. Cheang Kwan Chow (appointed w.e.f. July 22, 2008) N/A Mr. Lau Bik Soon (appointed w.e.f. August 13, 2008) N/A Dato’ Suriah Abd Rahman (appointed w.e.f. September 3, 2008) N/A Supply of Information All members of the Board are supplied with information in a timely manner. Board papers are circulated prior to Board meetings to enable directors to obtain further information and explanations, where required, before the meetings. Each director has unhindered access to information pertaining to the Group’s business and affairs to enable them to discharge their duties. In addition, certain matters are reserved specifically for the Board’s decision. These include approval of material acquisitions and disposals of assets, major corporate plans, financial results, and Board appointments. The directors also have direct access to the advice of Company Secretary, independent professional advisors and internal and external auditors, as and when appropriate, at the Company’s expense. Appointments to the Board Nomination Committee The Nomination Committee is responsible for identifying and recommending to the Board suitable nominees for Board appointments.The Nomination Committee is also responsible on the evaluation of director’s performance. Ultimate responsibility and final decisions on all matters, however, lies with the Board.16

Corporate Governance StatementA. BOARD OF DIRECTORS (Cont’d) Appointments to the Board (Cont’d) Nomination Committee The Nomination Committee comprised the following members in the financial year under review and their attendance at meetings is as follows: MEMBERS ATTENDANCE Dato’ Larry Gan Nyap Liou @ Gan Nyap Liow (Chairman) 1/1 Mr. Mathew Thomas A/L Vargis Mathews 1/1 Encik Shaifubahrim bin Mohd. Saleh 1/1 Mr. Tan Gee Sooi (appointed w.e.f. September 21, 2007 and 1/1 resigned w.e.f. July 22, 2008) Mr. Cheang Kwan Chow (appointed w.e.f. July 29, 2008) N/A Directors’ Training The Board, through the Nomination Committee, ensures that it recruits to the Board only individuals of sufficient calibre, knowledge, and experience to appropriately perform the duties of director. As at the end of the financial year under review, all directors have successfully completed the Mandatory Accreditation Programme (“Map”) except for Dato’ Suriah Abd Rahman and Mr. Lau Bik Soon who are newly appointed on 13 August 2008 and 3 September 2008 respectively and they will attend the MAP by end of this year. During the financial year under review, the Directors have attended and participated in various programmes and forums which they have individually or collectively considered as relevant and useful in contributing to the effective discharge of their duties as Directors. The programmes and forums attended by them individually or collectively included areas of leadership, strategic management, tax and regulatory updates.B. DIRECTORS’ REMUNERATION Remuneration Committee The Remuneration Committee comprised the following members in the financial year under review and their attendance at meetings is as follows: MEMBERS ATTENDANCE Dato’ Larry Gan Nyap Liou @ Gan Nyap Liow (Chairman) 1/1 Mr. Mathew Thomas A/L Vargis Mathews 1/1 Encik Shaifubahrim bin Mohd. Saleh 1/1 Mr. Tan Gee Sooi (appointed w.e.f. September 21, 2007 and 1/1 resigned w.e.f. July 22, 2008) Mr. Cheang Kwan Chow (appointed w.e.f. July 29, 2008) N/A The Committee is responsible for recommending the remuneration framework for directors and senior management staff. In formulating the recommended framework and levels of remuneration, the Committee has considered information prepared by management and independent consultants and survey data on the remuneration practices of comparable companies. 17

Corporate Governance Statement B. DIRECTORS’ REMUNERATION (Cont’d) Remuneration Committee (Cont’d) The Board, as a whole, determines the remuneration of non-executive directors, with each director concerned abstaining from any decision as regards his remuneration. Taking into account the performance of the Group and the responsibilities and performance of the directors, directors’ fees are set in accordance with a remuneration framework comprising responsibility fees and attendance fees. The Company pays its directors an annual fee which is approved annually by shareholders. Details of the nature and amount of each major element of the remuneration of directors of the Company, during the financial year, are as follows: Non- Executive Executive Remuneration (RM) Directors Directors Salaries 632,624 – Benefits-in-Kind 34,793 – Fees – 132,000 The number of directors whose remuneration fell within the respective bands is as follows: Non- Executive Executive Range of Remuneration (RM) Directors Directors 50,000 and below 1 2 50,001 to 100,000 – 1 100,001 to 150,000 – – 150,001 to 300,000 1 – 300,001 and above 1 – C. SHAREHOLDERS AND INVESTORS Communication The Company recognizes the importance of communicating with its shareholders and other stakeholders and does this through the Annual Reports, Annual General Meetings (AGM) and the various disclosures and announcements made to Bursa Malaysia Securities Berhad (“Bursa Malaysia”). At the AGM, the shareholders are encouraged to ask questions both about the resolutions being proposed or about the Group’s operations in general. In addition, the Company makes various announcements through Bursa Malaysia, in particular, the timely release of the quarterly results within two (2) months from the close of a particular quarter. Members of the public can also obtain the full financial results and Company announcements from the Bursa Malaysia website. Investor Relations Along with good corporate governance practices, the Company has embarked on appropriate corporate policies to provide greater disclosure and transparency through all its communications with its shareholders, investors and the general public. The Company strives to promote and encourage bilateral communications with its shareholders through participation at its general meetings and also ensures timely dissemination of any information to investors, analysts and the general public. The Group maintains the following website that allows all shareholders and investors access to information about the Group: www.redtone.com.18

Corporate Governance StatementD. ACCOUNTABILITY AND AUDIT Financial Reporting The Board aims to provide a balanced and meaningful assessment of the Group’s financialE. performance and prospects at the end of the financial year, primarily through the annual financial statements, quarterly announcements of results to shareholders and the Chairman’s and Group Managing Director’s Statement in the Annual Report. The Board is assisted by the Audit Committee in overseeing the Group’s financial reporting processes and the quality of its financial reporting. Internal Control The Board has overall responsibility for maintaining a system of internal control and risk management that provides a reasonable assurance of effective and efficient operations and compliance with laws and regulations, as well as with internal procedures and guidelines. The Statement on Internal Control furnished on pages 29 to 31 of this Annual Report provides an overview of the internal control framework within the Group during the financial year under review. Relationship with the Auditors The Company has established a transparent arrangement with the Auditors to meet their professional requirement. Key features underlying the relationship of the Audit Committee with the Internal and External Auditors are included in the Audit Committee Report on pages 23 to 28 of this Annual Report. A summary of the activities of the Audit Committee during the financial year under review, including an evaluation of the independent audit process is also set out in the Audit Committee Report. Internal Audit In the pursuit of greater independence in the internal audit function, the Internal Audit activity was outsourced during the financial year under review to Messrs Stanco & Ruche Consulting, a company specialising in the provision of internal audit services. A summary of the activities of the Audit Committee and the Internal Auditors during the financial year under review is set out in the Audit Committee Report. Corporate social responsibility The Company has a broad perspective of our social responsibility agenda and are committed to responsible practices pertaining to the development and improvement of our employees, the environment and the general community. In the current year, emphasis was placed on helping the disaster victims by donating funds to Sichuan Earthquake Relief and Myanmar Children’s Cyclone. Another emphasis was placed on saving the environment with the Group’s effort to organise an environment talk on 22 April 2008 which was held in conjunction with Earth Day for all tenants within our office building to bring awareness on global warming and recycling. Following that a recycling program was launched within our organisation to encourage the staff to recycle and reuse paper. Old and unused PCs were also being recycled and donated to underpriviledged schools in the Klang Valley. 19

Additional Compliance Information Options, Warrants or Convertible Securities During the financial year ended 31 May 2008, a total of 5,510,000 options were exercised pursuant to the Company’s Employees’ Share Option Scheme. The Company did not issue any warrants or convertible securities during the financial year ended 31 May 2008. Non Audit Fees The amount of non-audit fees paid to the external auditors by the Company for the financial year was RM11, 950 (2007: RM 51,320) Recurrent Related Party Transactions (“RRPT”) The aggregate value of recurrent related party transactions of revenue nature conducted during the financial year ended 31 May 2008 in accordance with the shareholders’ mandate were as follows: 1.6.2007 TO TRANSACTING NATURE NATURE OF COMPANY PARTY OF RELATIONSHIP 31.5.2008 TRANSACTION RM’000 RMSB sells call bandwidth to RMT REDtone Marketing REDtone Mytel RMSB is a wholly 7,353 Sdn Bhd (“RMSB”) Sdn Bhd (“RMT”) owned subsidiary of RTC entered into a REDtone International Tenancy Agreement Berhad (“RIB”). with ERSB on 1 January 2006 for REDtone Technology renting of office space. Sdn Bhd (“RT”), a Location: wholly owned Suite 25-26, 4th Floor, subsidiary of RIB. Suite 22-23, 5th Floor, IOI Business Park, RT holds 60% in RMT 47100 Puchong, while Lai Kim Choy, Selangor Subtantial Shareholder Measurement: of RMT, holds 40% 5,523 sq ft equity interest in RMT. Monthly Rental: RM8,836.80 (from REDtone Endless Revenue RTC is a wholly owned 106 November 2007 to Telecommunications Sdn Bhd (“ERSB”) subsidiary of RIB. December 2007) Sdn Bhd (“RTC”) RM9,941.40 (from Wei Chuan Beng is the January 2008 to Director and shareholder December 2008) of RIB. Wei Chuan Beng’s Tenure: spouse, namely Two (2) years Choo Yeh Fung is the (1 January 2006 to Director and substantial 31 December 2007 shareholder of ERSB. and renewed for one year from 1 January to 31 December 2008) 20

Additional Compliance Information 1.6.2007 TO TRANSACTING NATURE NATURE OFCOMPANY PARTY OF RELATIONSHIP 31.5.2008 TRANSACTION RM’000 RTC ERSB RTC is a wholly owned 44 RTC entered into a subsidiary of RIB. Tenancy Agreement with ERSB on Wei Chuan Beng is the 3 January 2006 for Director and shareholder renting of office space. of RIB. Wei Chuan Beng’s spouse, namely Location: Choo Yeh Fung is the E3A-15, 4th Floor, Director and substantial Block E, Phileo shareholder of ERSB. Damansara 1, 9, Jalan 16/11 Off Jalan Damansara, 46350 Petaling Jaya Measurement: 2,167 sq ft Monthly rental: RM3,700.00 Tenure: 3 January 2007 to 2 January 2008 and renewed for 6 months until June 2008 Revaluation of Landed PropertyThe Group has properties that falls within the definition of investment property. The Group adopts the fairvalue approach for this investment property and valuations are done annually.Share Buy-BacksDuring the financial year under review, the Company did not enter into any share buy-backtransactions.Sanctions and/or PenaltiesIn the financial year ended May 31, 2008 the company was subject to two reprimands for breaches of thelisting requirements of Bursa Malaysia Securities Berhad for the MESDAQ Market.The first was a private reprimand for breach of Rule 9.16(1) (a) for not taking into account the adjustmentsas stated in the Company’s announcement dated October 11, 2007 in the Company’s Unaudited Resultsfor the financial year ended 31st May, 2007.The second was a public reprimand for breach of Rule 9.24(b) for late submission of the audited financialstatements for the financial year ended May 31, 2007. A penalty of RM9,000 was imposed for the secondreprimand.Profit Estimates, Forecasts or ProjectionsThere were no significant variances noted between the reported results and the unaudited resultsannounced. The Company did not make any release on the profit estimates, forecasts or projections forthe financial year. 21

Additional Compliance Information Profit Guarantees There were no profit guarantees given by the Company during the financial year. Material Contract Involving Directors and Substantial Shareholders The Company and its subsidiary companies have not entered into any material contracts outside the ordinary course of business, involving directors and substantial shareholders since the end of the previous financial year. Statement Of Compliance The Group has complied throughout the financial year ended 31 May 2008 with all the Best Practices of Corporate Governance set out in Part 2 of the Code. Family Relationship None of the Directors has any family relationship with other Directors and/or substantial shareholder. Conflict of Interest The Company subsdiary has entered into recurrent related party transaction of a revenue or trading nature with Endless Revenue Sdn Bhd (“ERSB”) in which the spouse of one of the Directors of the Company, Wei Chuan Beng, is the director and major shareholder of ERSB. The details are disclosed in pages 20 and 21 of the Annual Report. Save for the above, none of the Directors have any conflict of interest with the Company. Securities Holdings in the Company and Its Subsidiaries The interest of Directos are set out in page 32 of the Annual Report. Save as disclosed, none of the Directors hold any shares in the Company and its subsidiaries. Conviction for Offences None of the Directors has been convicted for any offences within the past ten years.22

Audit Committee ReportCHANGES TO THE MALAYSIAN CODE OF CORPORATE GOVERNANCEAs released by the Securities Commission in October 2007, the Malaysian Code of Corporate Governance(“the Code”) has been revised in line with developments in the domestic and international capitalmarkets, to further improve corporate governance standards and strengthen investor confidence. Thekey amendments to the Code are aimed at strengthening Board of Directors and Audit Committees, andensuring their roles and responsibilities are discharged effectively.The Board will ensure that the changes are adequately reflected and updated in the Terms of Reference ofthe Audit Committee and the Board endeavours to adequately reflect all other changes by the requirementdeadline in 2009.TERMS OF REFERENCEThe Audit Committee was established to act as a Committee of the Board of Directors to fulfill its fiduciaryresponsibilities. The Audit Committee shall assist the Board of Directors to review the adequacy andintegrity of the Group’s financial administration and reporting, internal control and risk managementsystems including the management information systems and systems for compliance with applicablelaws, regulations, rules, directives and guidelines.1.0 COMPOSITION1.1 The Committee shall fulfill the following requirements:- a. The Committee must be composed of no fewer than 3 members; b. All members of the Audit Committee shall be non-executive directors and financially literate, a majority of the Committee must be independent directors; and c. At least one (1) member of the Committee:- i. must be a member of the Malaysian Institute of Accountants; or ii. if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) year’s working experience and :- aa. he must have passed the examination specified in Part 1 of the First Schedule of the Accountants Act, 1967; or bb. he must be a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act, 1967; or iii. Be a holder of a degree/ masters/ doctorate in accounting or finance and has at least 3 years’ post qualification experience in accounting or finance; or iv. Have at least 7 years’ experience being a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation; or v. Fulfils such other requirement as prescribed by the Exchange.1.2 Members of the Committee shall elect from among them a Chairman who shall be an independent non-executive director.1.3 No alternate director should be appointed as a member of the Committee.1.4 In the event of any vacancy in the Committee resulting in the non-compliance of the Listing Requirements pertaining to composition of audit committee, the Board of Directors shall within three months of that event fill the vacancy.1.5 The terms of office and performance of the Committee and each of its members must be reviewed by the Board of Directors at least once every 3 years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference. 23

Audit Committee Report 2.0 MEMBERSHIP 2.1 The present members of the Committee comprise of the following Directors: DIRECTOR ROLE Mathew Thomas A/L Vargis Mathews Chairman Zainal Amanshah bin Zainal Arshad (resigned w.e.f. 25/8/2008) Shaifubahrim Bin Mohd Saleh Member Cheang Kwan Chow (appointed w.e.f. 25/8/2008) Member Member 3.0 MEETINGS 3.1 Frequency 3.1.1 Meeting shall be held at least four (4) times annually, or more frequently if circumstances 3.1.2 so require the Committee to do so. Upon the request of the external auditor, the Chairman of the Committee shall convene a meeting of the Committee to consider any matter the external auditor believes should be brought to the attention of the Directors or shareholders. 3.2 Quorum 3.2.1 A quorum shall consist of a majority of independent directors. In the absence of the Chairman, the members present shall elect a Chairman for the meeting from amongst the members present. 3.3 Secretary 3.3.1 The Company Secretary shall be the Secretary of the Committee or in his absence, another person authorized by the Chairman of the Committee. The Secretary in conjunction with the Chairman shall draw up an agenda which shall be circulated at least one (1) week before each meeting to members of the Committee. 3.4 Attendance 3.4.1 The Head of the Finance Department and the Internal Auditors shall normally attend meetings. 3.4.2 Other Directors, employees and a representative of the external auditor may attend any particular meeting only at the Committee’s invitation, specific to the relevant meeting. 3.5 Reporting Procedure 3.5.1 The Minutes of each meeting shall be circulated to all members of the Board. 3.6 Meeting Procedure The Committee shall regulate its own procedure, in particular:- (a) The calling of meetings; (b) The notice to be given of such meetings; (c) The voting and proceedings of such meetings; (d) The keeping of minutes; and (e) The custody, production and inspection of such minutes.24

Audit Committee Report4.0 RIGHTS The Committee shall:(a) Have authority to investigate any matter within its terms of reference;(b) Have the resources which it needs to perform its duties;(c) Have full and unrestricted access to any information pertaining to the Company and Group;(d) Have unrestricted access to the senior management of the Company and Group;(e) Have direct communication channels with the external auditor and person(s) carrying out the(f) internal audit function or activity;(g) Be able to obtain independent professional or other advice in the performance of its duties;(h) Be able to convene meetings with external auditors, internal auditors or both, excluding the attendance of the other directors and employees whenever deemed necessary; and Be able to invite outsiders with relevant experience to attend its meeting, whenever deemed necessary.5.0 FUNCTIONS The Committee shall, amongst other, discharge the following functions:5.1 To review (a) The quarterly result and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:- (b) (i) the going concern assumption; (c) (ii) changes in or implementation of major accounting policy changes; (iii) significant and unusual events; and (iv) compliance with accounting standards and other legal requirements. Any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity. With the external auditor: (i) the audit plan; (ii) the evaluation of the system of internal controls; (iii) th audit report; (iv) th management letter and management’s response; and (v) the assistance given by the Company’s employees to the external auditor;5.2 To review the effectiveness of the internal control, management information system and management’s risk management practices and procedures.5.3 In respect of the appointment of external auditors: (a) To review whether there is reason (supported by grounds) to believe that the external (b) auditor is not suitable for reappointment; (c) To consider the nomination of a person or persons as external auditors and the audit fee; and To consider any questions of resignation or dismissal of external auditors. 25

Audit Committee Report 5.0 FUNCTIONS (Cont’d) 5.4 In respect of the internal audit function: (a) To review the adequacy of the scope, functions, competency and resources of the internal audit function and that it has the necessary authority to carry out its work; (b) To review the internal audit program, processes, the results of the internal audit program, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function; (c) To review any appraisal or assessment of the performance of members of the internal audit function; (d) To approve any appointment or termination of senior staff members of the internal audit function; and (e) To inform itself of any resignation of internal audit staff member and provide the resignation staff member an opportunity to submit his reasons for resigning. 5.5 To promptly report such matter to Bursa Malaysia if the Committee is of the view that the matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements. 5.6 To carry out such other function as may be agreed to by the Committee and the Board of Directors THE AUDIT COMMITTEE REPORT IN RESPECT OF THE YEAR UNDER REVIEW Membership The Directors who served as members of the Audit Committee during the financial year under review and as at the date of this report are: MEMBERS STATUS Mathew Thomas A/L Vargis Mathews (Chairman) Independent Zainal Amanshah bin Zainal Arshad (resigned w.e.f. 25/8/2008) Non Executive Director Non Independent Shaifubahrim Bin Mohd Saleh Executive Director Independent Cheang Kwan Chow (appointed w.e.f. 25/8/2008) Non Executive Director Non Independent Non Executive Director Meetings The Audit Committee convened a total of five (5) meetings and recorded an attendance of its members during the financial year as follows: MEMBERS ATTENDANCE 5/5 Mathew Thomas A/L Vargis Mathews (Chairman) 4/5 Zainal Amanshah bin Zainal Arshad (resigned w.e.f. 25/8/2008) 5/5 Shaifubahrim Bin Mohd Saleh N/A Cheang Kwan Chow (appointed w.e.f. 25/8/2008) The Company Secretary was present at all meetings. The five Audit Committee meetings were held on the following dates: 2007 - 26 July, 27 September and 25 October 2008 - 24 January and 25 April26

Audit Committee ReportTHE AUDIT COMMITTEE REPORT IN RESPECT OF THE YEAR UNDER REVIEW (Cont’d)Meetings (Cont’d)Also attended, when required, by invitation were representatives from Corporate Planning and Financewith the General Managers of these depar tments representing their respective depar tment. TheManaging Partner of Stanco & Ruche Consulting represented the Internal Auditors also by invitation, whenrequired.Where appropriate, the External Auditors were invited to attend and brief the Audit Committee and to provideresponses to queries raised by the Audit Committee in respect of the Company’s Financial Statementsand reporting requirements.SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR UNDERREVIEW1. Reviewed the unaudited quarterly financial results of the Group before recommending to the Board2. of Directors for their approval and release of the Group’s financial results to Bursa Malaysia.3. Reviewed the Audit Planning Memorandum of the Group for the financial period ended 31 May 2008 with the External Auditors and deliberated on the appointment and fee payable to the External Auditors before recommending to the Board of Directors for approval.4. Together with the External Auditors, reviewed the audited financial statements of the Group, the issues5. arising from the audit, their resolution and the audit report prior to recommending to the Board of6. Directors for approval. Without the presence of Management, reviewed the extent of cooperation of Management in providing required information, explanation and clarification and whether this was done timely and if there had been any problems impinging on their independence and objectivity in the course of their audit. Reviewed with the Internal Auditor the internal audit findings and recommendations presented and the manner in which the issues raised by the internal auditor was subsequently responded to and resolved by management. Reviewed the role and management of the internal audit function and the option to outsource the internal audit function for the ensuing year. Reviewed other pertinent issues of the Group, which has significant impact on the results of the Group and the statutory audits.INTERNAL AUDIT FUNCTIONIt is the responsibility of the internal audit department to provide the Audit Committee with independentand objective reports on the state of internal control of the various operating units within the Group andthe extent of compliance of the units with the Group’s established policies and procedures.The Board of Directors and the Audit Committee have also in the interest of continuity and greaterindependence in the internal audit function, taken the decision to outsource the internal audit functionto Messrs Stanco & Ruche Consulting, a firm specialising in the provision of outsourced internal auditservices.The appointment of Messrs Stanco & Ruche takes effect from July 3, 2007. 27

Audit Committee Report INTERNAL AUDIT FUNCTION (Cont’d) The functions of the internal auditors are to: 1. Perform audit work in accordance with the pre-approved internal audit plan; and 2. Carry out reviews on the systems of internal control of the Group; 3. Review and comment on the effectiveness and adequacy of the existing control policies 4. procedures; Provide recommendations, if any, for the improvement of the control policies and procedures. In the financial year ended May 31, 2008, the internal auditors undertook three operational reviews and with the adoption of the recommendations made by the internal auditors, the reviews were found to be satisfactory. The operational reviews undertaken were as follows: • Human Resource & Payroll Management • Procurement & Payables Management • Fixed Assets Management STATEMENT ON EXECUTIVE SHARE OPTION SCHEME BY THE COMMITTEE The Audit Committee confirms that the allocation of options offered by the Company to the eligible employees of the Group complies with the By-Laws of the Company’s ESOS.28

Statement of Internal Control1. INTRODUCTION The Malaysian Code of Corporate Governance requires listed companies to maintain a sound system of internal controls to safeguard shareholders’ investments and Group assets. The Bursa Malaysia Listing Requirements Paragraph 15.27(b) requires Directors of listed companies to include a statement in their annual report on the state of their internal controls. The Board of Directors of REDtone International Berhad, in recognition of its responsibility, hereby issues the following statement which is prepared in accordance with these requirements and the Statement of Internal Control: Guidance for Directors of Public Listed Companies.2. BOARD RESPONSIBILITY The Board of Directors acknowledges that it is their responsibility to maintain a sound system of internal controls to cover all aspects of the Group’s business. This responsibility requires Directors to establish procedures, controls and policies and to seek continuous assurance that the system is operating satisfactorily. The Directors are also aware that a sound internal control system provides reasonable and not absolute assurance that the Company will not be hindered in achieving its business objectives in the ordinary course of business. The Board maintains full control over strategic, financial, organisational and compliance issues and has put in place an organization with formal lines of responsibility and delegation of authority. The Board has delegated to the executive management the implementation of the system of internal controls within an established framework throughout the Group. The Board also acknowledges the need to establish an ongoing process for identifying, evaluating and managing significant risks faced by the Group and to regularly review this process with the Statement on Internal Control: Guidance for Directors of Public Listed Companies.3. CONTROL STRUCTURE & RISK MANAGEMENT FRAMEWORK Day to day operations is monitored by the Managing Director & Executive Directors. This control is exercised through Senior Management in respect of commercial, financial and operational aspects of the Company.The Managing Director, Executive Director and Senior Management meet regularly in respect of such matters. The Board fully supports the contents of the Internal Control Guidance and through the Audit Committee continually reviews the adequacy and effectiveness of the risk management processes in place within the various operating units with the aim of strengthening the risk management functions across the Group. Management is responsible for the management of risks, for developing, operating and monitoring the system of internal control and for providing assurance to the Board that it has done so in accordance with the policies adopted by the Board. Further assurance is provided by the Internal Audit function which operates across the Group with emphasis on key operating units within the Group. The Board of Directors and Management recognise that the development of an effective internal control system is an ongoing process and to this end maintains a continuous commitment to strengthen the existing internal control environment of the Group. 29

Statement of Internal Control 4. INTERNAL AUDIT FUNCTION In a desire to maintain total independence in the internal control environment and remain in compliance with the Bursa Malaysia Listing Requirements, the Company has appointed Messrs Stanco & Ruche Consulting to manage the Company’s Internal Audit function on an outsourced basis with effect from July 3, 2007. Prior to the appointment of Messrs Stanco & Ruche Consulting, the Internal Audit function was managed by a chief internal auditor of the Group. The Internal Audit function independently reviews the risk identification procedures and control processes implemented by Management and reports to the Audit Committee periodically. It also reviews the internal controls in the key activities of the Group’s business based on the risk profiles of the business units in the Group. In addition, the Internal Auditors carry out periodic assignments to ensure the policies and procedures established by the Board are complied with by Management. The Internal Audit activity adopts a risk based approach together with an audit plan that is agreed with the Audit Committee covering a three year period. Following the appointment of Messrs Stanco & Ruche Consulting as Internal Auditors in the year under review, the Internal Auditors undertook three assignments covering the following areas as indicated in the Audit Committee Report: • Human Resource & Payroll Management • Procurement & Payables Management • Fixed Assets Management 5. OTHER KEY INTERNAL CONTROL ELEMENTS • Clearly defined terms of reference, authorities and responsibilities of the various committees which include Audit Committee, Nomination Committee and Remuneration Committee. • Well defined organisational structure with clear lines of accountability and delegation of responsibilities to senior management and the respective division heads including appropriate authority limits to ensure accountability and approval responsibility. • Budgets are prepared annually for the Business/Operating units and approved by the Board.The budgets include operational, financial and capital expenditure requirements and performance monitored on a monthly basis and the business objectives and plans are reviewed in the monthly management meetings attended by division and business unit heads.The Managing Director & Executive Directors meet regularly with Senior Management to consider the Group’s financial performance, business initiatives and other management and corporate issues. • There are regular Board meetings and Board papers are distributed to members and Board members are entitled to receive and access all necessary and relevant information and decisions of the Board are only made after the required information is made available and deliberated on by the Board. The Board maintains complete and effective control over the strategies and direction of the Group. • The Audit Committee reviews the effectiveness of the Group’s system of internal control on behalf of the Board. The Audit Committee comprises of non-executive members of the Board, the majority of who are independent directors.The Audit Committee is not restricted in any way in the conduct of its duties and has unrestricted access to the internal and external auditors of the company and to all employees of the Group. • Review by the Audit Committee of internal control issues identified by the External and Internal Auditors and action taken by management in respect of the findings arising there from. The Internal Audit function reports directly to the Audit Committee. Findings are communicated to Management and the Audit Committee with recommendations for improvements and follow up to confirm all agreed recommendations are implemented.The Internal Audit plan is structured on a risk based approach and is reviewed and approved by the Audit Committee.30

Statement of Internal Control5. OTHER KEY INTERNAL CONTROL ELEMENTS (Cont’d) • Review of all proposals for material capital and investment opportunities by the management committee and approval for the same by the Board prior to expenditure being committed. • There are sufficient reports generated in respect of the business and operating units to enable proper review of the operational, financial and regulatory environment. Management Accounts are prepared timely and on a monthly basis and is reviewed by the Managing Director, Executive Directors and Senior Management. • The decision of the Board of Directors to the appointment of Messrs Stanco & Ruche Consulting, a firm specialising in the provision of Internal Audit services, to manage the Internal Audit function of the company on an outsourced basis for greater independence and accountability in the Internal Audit function.6. WEAKNESSES IN INTERNAL CONTROL RESULTING IN MATERIAL LOSS The Board of Directors is of the opinion that there is no significant weakness in the system of internal control, contingencies or uncertainties that could result in material loss and adversely affect the Group. The Group continues to take necessary measures to strengthen its internal control structure and the management of risks. 31

Statement of Directors’ Interests in the Company and related corporation as at 26 September 2008 Direct Indirect No. of No. of Ordinary Ordinary Name of Director Shares % Shares % The Company – – Dato’ Larry Gan Nyap Liou @ Gan Nyap Liow – – 2.66 Wei Chuan Beng 11,664,850 4.53 (1)6,865,984 0.06 Zainal Amanshah bin Zainal Arshad 2,975,179 1.15 (2)150,000 Lau Bik Soon 150,067 0.06 – – Cheang Kwan Chow – – – – Mathew Thomas A/L Vargis Mathews – – – – Shaifubahrim bin Mohd Saleh – – – – Dato’ Suriah Abd Rahman – – – – – Subsidiary REDtone Network Sdn Bhd Zainal Amanshah bin Zainal Arshad 450,000 30.00 – Note: 1. Deemed interested by virtue of the direct shareholding of his wife, Choo Yeh Fung 2. Deemed interested by virtue of the direct shareholding of his wife, Suryani Binti Ahmad Sarji32

Statement on Directors’ ResponsibilityThe Companies Act 1965 (the Act) requires the Directors to present financial statements of REDtoneInternational Berhad and its subsidiaries which give a true and fair view of the Group and the Companyat the end of the financial year. As required by the Act and the Listing Requirements of Bursa MalaysiaSecurities Berhad, the financial statements have been prepared in accordance with the CompaniesAct 1965 and the Approved Accounting Standards in Malaysia. The financial statements include theconsolidated balance sheet, cash flows and income statements and are made out in accordance withrelevant provisions of the Act and applicable accounting standards.The Directors have placed reliance on the system of internal control within the Company and the Groupto form a basis of reasonable grounds that accounting systems and records maintained by the Companyand the Group provide a true and fair view of the current state of affairs of the Company and the Group, atrue and fair view of the financial year results and that it sufficiently explains the transactions and financialposition of the Company and the Group.The Directors also have a general responsibility in taking steps topreserve the interests of stakeholders and to safeguard the assets of the Company and the Group.The Directors have further responsibility of ensuring that reasonably proper, accurate, timely and reliableaccounting records are kept. The annual audited financial statements have been prepared based onrelevant and appropriate accounting policies and with usage of reasonable and prudent judgment andestimates.The Directors have also a general responsibility for taking such steps as is reasonably open to them tosafeguard the assets of the Group and to prevent and detect fraud and other irregularities.In compliance with the several responsibilities of the Directors, the Directors present the financial statementsof the Company and the Group for the financial year ended 31 May 2008 as set out on pages 41 to 110of this annual report. 33

Directors’ Report The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 May 2008. Principal activities The principal activities of the Company are investment holding and provision of management services to the subsidiaries. The principal activities of the subsidiaries are as disclosed under Note 13 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year except for the discontinuance arising from the proposed disposal of data communication services business in Peninsular Malaysia, the proposed disposal of a subsidiary involved in research and development, manufacturing and marketing of telecommunication and multimedia solutions and the discontinuance arising from disposal of an oversea subsidiary involved in provision of computer telephony systems and services as disclosed in Note 9 to the financial statements. Results Group Company RM RM Loss after tax from continuing operations (9,543,375) (824,574) Profit for the year from discontinued operations 2,538,068 – Loss for the year (7,005,307) (824,574) Attributable to: (6,798,619) (824,574) Equity holders of the Company (206,688) – Minority interests (7,005,307) (824,574) There were no material transfers to or from reserves or provisions during the financial year, other than as disclosed in the financial statements. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature. Dividend No dividend were declared and paid during the financial year. The directors do not recommend the payment of any dividend for the current financial year.34

Directors’ ReportDirectorsThe names of the directors of the Company in office since the date of the last report and at the date ofthis report are:Dato’ Gan Nyap Liou @ Gan Nyap Liow (appointed on 22 July 2008)Wei Chuan Beng (appointed on 13 August 2008)Mathew Thomas A/L Vargis Mathews (appointed on 3 September 2008)Shaifubahrim Bin Mohd Saleh (resigned on 23 November 2007)Zainal Amanshah bin Zainal Arshad (resigned on 22 July 2008)Cheang Kwan Chow Lau Bik Soon Dato’ Suriah binti Abd Rahman Peter Yeow Heng Ho Tan Gee Sooi None of the other directors in office at the end of the financial year had any interest in shares in theCompany or its related corporations during the financial year.Directors’ benefitsNeither at the end of the financial year, nor at any time during that year, did there subsist any arrangement towhich the Company was a party, whereby the directors might acquire benefits by means of the acquisitionof shares in or debentures of the Company or any other body corporate, other than those arising from theshare options granted under the Employees’ Share Options Scheme (“ESOS”).Since the end of the previous financial year, no director has received or become entitled to receive a benefit(other than benefits included in the aggregate amount of emoluments received or due and receivable bythe directors of the fixed salary of a full-time employee of the Company as shown in Note 6 to the financialstatements) by reason of a contract made by the Company or a related corporation with any director orwith a firm of which the director is a member, or with a company in which the director has a substantialfinancial interest, except as disclosed in Note 30 to the financial statements.Directors’ interestsAccording to the register of directors’ shareholdings, the interests of directors in office at the end of thefinancial year in shares and options over shares in the Company and its related corporations during thefinancial year were as follows: Number of ordinary shares of RM0.10 each 1 June 31 May 2007 Acquired Sold 2008The CompanyDirect interest: 310,000 – 310,000 –Dato’ Gan Nyap Liou @ Gan Nyap Liow 17,134,850 4,500,000 9,970,000 11,664,850Wei Chuan Beng Zainal Amanshah bin Zainal Arshad 3,096,179 – 121,000 2,975,179Deemed Interest: 8,865,984 – 2,000,000 6,865,984Wei Chuan Beng* 200,000 - 50,000 150,000Zainal Amanshah bin Zainal Arshad** Subsidiary - REDtone Network Sdn. Bhd.Direct interest – 450,000Zainal Amanshah bin Zainal Arshad 450,000 – * Deemed interested by virtue of the direct shareholding of his wife, Choo Yeh Fung.** Deemed interested by virtue of the direct shareholding of his wife, Suryani Binti Ahmad Sarji. 35

Directors’ Report Directors’ interests (Cont’d) Number of options over ordinary shares of RM0.10 Each 1 June 31 May 2007 Granted Exercised Forfeited 2008 The Company - REDtone International Berhad Wei Chuan Beng 5,000,000 – 4,500,000 – 500,000 Zainal Amanshah bin Zainal Arshad 1,200,000 – – – 1,200,000 Mathew Thomas A/L Vargis Mathews – – – 150,000 Shaifubahrim bin Mohd Saleh 150,000 – – – 90,000 90,000 None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year. Issue of shares During the financial year, the Company increased its issued and paid-up ordinary share capital from RM25,213,500 to RM25,764,500 by way of the issuance of 5,510,000 ordinary shares of RM0.10 each for cash pursuant to the Company’s ESOS. The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company. Employee share options scheme of the holding company (“ESOS”) The Company’s Employees’ Share Options Scheme (“ESOS”) is governed by the by-laws approved by the shareholders at an Extraordinary General Meeting held on 10 February 2006. The ESOS was implemented on 15 February 2006 and is to be in force for a period of 4 years from the date of implementation. The Board of Directors and Options Committee may as deemed fit, extend the ESOS for another 6 years. The salient features and other terms of the ESOS are disclosed in Note 28 to the financial statements. There was no share option granted during the financial year. Details of options granted to directors are disclosed in the section on Directors’ Interest in this report. Other statutory information (a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps: (i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts in the financial statements of the Group. The directors also satisfied themselves that there were no known bad debts and that no provision for doubtful debts was necessary in the financial statements of the Company; and (ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise. (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group inadequate to any substantial extent nor are they aware of any circumstances which would render it necessary to write off any bad debts or the amount of the provision for doubtful debts inadequate to any substantial extent in respect of the financial statements of the Company; and36

Directors’ ReportOther statutory information (cont’d) (ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.(e) As at the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or (ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.(f) In the opinion of the directors: (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and (ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.Significant events Details of the significant events are disclosed in Note 33 to the financial statements. Subsequent event Details of the subsequent event are disclosed in Note 34 to the financial statements.AuditorsThe auditors, Ernst & Young, have expressed their willingness to continue in office.Signed on behalf of the Board in accordance with a resolution of the directors dated 30 September2008.Wei Chuan Beng Zainal Amanshah Bin Zainal ArshadKuala Lumpur, Malaysia 37

Statement by Directors Pursuant to Section 169(15) of the Companies Act, 1965 We, Wei Chuan Beng and Zainal Amanshah Bin Zainal Arshad, being two of the directors of Redtone International Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 41 to 110 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 May 2008 and of the results and the cash flows of the Group and of the Company for the year then ended. Signed on behalf of the Board in accordance with a resolution of the directors dated 30 September 2008. Wei Chuan Beng Zainal Amanshah Bin Zainal Arshad Kuala Lumpur, Malaysia Statutory Declaration Pursuant to Section 169(16) of the Companies Act, 1965 I, Noraesyah Yvonne binti Abdullah, being the officer primarily responsible for the financial management of Redtone International Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 41 to 110 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960. Subscribed and solemnly declared by Noraesyah Yvonne binti Abdullah the abovenamed Noraesyah Yvonne binti Abdullah at Puchong in the Selangor on 30 September 2008. Before me,38

Independent Auditors’ Reportto the members of Redtone International BerhadWe have audited the financial statements of REDtone International Berhad, which comprise the balancesheets as at 31 May 2008 of the Group and of the Company, and the income statements, statements ofchanges in equity and cash flow statements of the Group and of the Company for the year then ended,and a summary of significant accounting policies and other explanatory notes, as set out on pages 41to 110.Directors’ responsibility for the financial statementsThe directors of the Company are responsible for the preparation and fair presentation of these financialstatements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia.This responsibility includes: designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement, whetherdue to fraud or error; selecting and applying appropriate accounting policies; and making accountingestimates that are reasonable in the circumstances.Auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with approved standards on auditing in Malaysia. Those standards require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements.The procedures selected depend on our judgment, including the assessment ofrisks of material misstatement of the financial statements, whether due to fraud or error. In making thoserisk assessments, we consider internal control relevant to the entity’s preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An auditalso includes evaluating the appropriateness of the accounting policies used and the reasonableness ofaccounting estimates made by the directors, as well as evaluating the overall presentation of the financialstatements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion. OpinionIn our opinion, the financial statements have been properly drawn up in accordance with FinancialReporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of thefinancial position of the Group and of the Company as at 31 May 2008 and of their financial performanceand cash flows for the year then ended.Report on other legal and regulatory requirementsIn accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report thefollowing:(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.(b) We have considered the accounts and the auditors’ reports of the subsidiaries of which we have not acted as auditors, which are indicated in Note 13 to the financial statements.(c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.(d) The auditors’ reports on the accounts of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act. 39

Independent Auditors’ Report to the members of Redtone International Berhad Other matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young Abraham Verghese a/l T.V. Abraham AF : 0039 No. 1664/10/08(J) Chartered Accountants Chartered Accountant Kuala Lumpur, Malaysia 30 September 2008 40

Income StatementsFor the year ended 31 May 2008 Note 2008 Group Company RM 2007 2008 2007 RM RM RMContinuing Operations 109,999,193 Revenue 3 2,476,873 100,530,075 – –Other income 4 776,570 19,664 108,684Call bandwidth cost (72,199,616) Changes in inventories of (45,418,553) – – – – trading goods (195,260) (599,960) (91) (91)Depreciation of property, plant (210,631) – and equipment (3,244,103) (2,742,212) – –Employee benefits expense 5 (14,924,197) (14,482,594) – –Gain on disposal of a subsidiary 9(b) – –Materials and consumables used 273,632 – – –Sales commissions and incentives (4,332,969) (6,301,797) (633,516) (622,804)Universal Service Provision fund (6,777,569) (8,836,466) (824,574) (514,211) – – contribution (1,444,204) (2,357,856) – –Other expenses (18,343,732) (17,188,640) (824,574) (514,211) – –Operating (loss)/profit (8,711,952) 3,378,567 Share of profit/(loss) of associate 141,258 (875,668) Share of loss of jointly controlled entity (1,551) (6,201) (Loss)/profit before tax 7 (8,572,245) 2,496,698 Income tax (expense)/benefit 8 (971,130) 2,330,179 (Loss)/profit for the year from (9,543,375) 4,826,877 (824,574) (514,211) continuing operations Discontinued Operations 9 2,538,068 87,985 – –Profit after tax for the year from (7,005,307) 4,914,862 (824,574) (514,211) discontinued operations (824,574) (514,211)(Loss)/profit for the year – –Attributable to: (6,798,619) 5,561,828 (824,574) (514,211)Equity holders of the Company (206,688) (646,966) Minority interests – – (7,005,307) 4,914,862 – –Earnings per share attributable to 10 (2.7) 2.2 equity holders of the Company (sen): 10 (2.6) 2.2 Basic, for the (loss)/profit for the year Diluted, for the (loss)/profit for the year The accompanying notes form an integral part of the financial statements 41

Balance Sheets as at 31 May 2008 Note 2008 Group Company RM 2007 2008 2007 RM RM RM Assets Non-current assets 12 22,575,371 23,637,960 561 652 Property, plant and equipment 13 – – 5,227,966 4,188,146 Investments in subsidiaries 14 Investments in associates 15 1,316,610 202,125 – – Investment in a jointly 16 1,492,248 1,493,799 – – controlled entity 17 – – Investment property 18 790,000 790,000 – – Intangible assets 20 13,213,535 5,188,969 – – Deferred tax assets 22 4,103,813 – – Other receivables 3,833,705 – – Other investments 457,016 322,680 5,228,527 4,188,798 – 600,000 36,339,346 43,678,485 Current assets Inventories 19 1,567,419 1,937,491 – – Trade and other receivables 20 38,531,145 34,258,829 39,331,237 37,926,196 Tax recoverable Marketable securities 21 1,115,065 662,843 – 652 Other investments 22 – 1,266,329 – – Cash and bank balances 23 112,037 724,031 88,455 108 53,312 20,763,607 25,257,938 39,443,382 8 Assets of disposal group 62,701,267 63,471,885 – classified as held for sale 9 39,443,382 37,980,168 4,525,292 – 44,671,909 – 67,226,559 63,471,885 110,905,044 99,811,231 37,980,168 Total assets 42,168,96642

Balance Sheets (Cont’d)as at 31 May 2008 2008 Group Company Note RM 2007 2008 2007 RM RM RMEquity and liabilitiesEquity attributable to equity holders of the Company Share capital 26 25,764,500 25,213,500 25,764,500 25,213,500 Share premium 26 19,278,304 16,492,448 19,278,304 16,492,448 Other reserves 27 Retained earnings/ 1,955,654 1,063,500 739,915 767,651 (accumulated losses) 18,286,062 25,084,681 (1,154,883) (330,309) 65,284,520 67,854,129 44,627,836 42,143,290 Minority interests 5,741,445 2,529,538 – – 71,025,965 70,383,667 44,627,836 42,143,290Total equity Non-current liabilities 18 2,496 14,695 – – Deferred tax liabilities 8,821,077 2,484,737 – –Current liabilities 24 29,807,567 26,525,590 44,073 25,676 Deferred income Trade and other payables 25 429,348 402,542 – –Current tax payable 39,057,992 29,412,869 44,073 25,676 818,591 – – – Liabilities directly associated 39,876,583 29,412,869 44,073 25,676 with assets classified as held 39,879,079 29,427,564 44,073 25,676 for sale 9 110,905,044 99,811,231 44,671,909 42,168,966 Total liabilities Total equity and liabilities The accompanying notes form an integral part of the financial statements 43

Statements of Changes In Equity For the year ended 31 May 2008 Attributable to Equity Holders of the Company Non-distributable Distributable Share Share Other Retained Minority Total capital premium reserves earnings Total interests equity GROUP Note (Note 26) (Note 26) (Note 27) RM RM RM RM RM RM RM At 1 June 2006 As previously stated 25,200,000 16,420,897 (369,803) 22,345,617 63,596,711 3,564,712 67,161,423 Effects of adopting FRS 121 – – – (618,672) (274,231) (344,441) (618,672) 3,564,712 66,542,751 At 1 June 2006 (Restated) 25,200,000 16,420,897 (644,034) 22,001,176 62,978,039 – 7,601,677 Effects of adopting FRS 3 – – – 7,601,677 7,601,677 3,564,712 74,144,428 25,200,000 16,420,897 (644,034) 29,602,853 70,579,716 Foreign currency translation, representing net income recognised directly in equity – – 939,883 – 939,883 – 939,883 – – – 5,561,828 5,561,828 (646,966) 4,914,862 Profit for the year Total recognised income – – 939,883 5,561,828 6,501,711 (646,966) 5,854,745 and expense for the year – – – – – 74,161 74,161 Acquisition of subsidiary – – – – Contribution to share capital – – of subsidiaries by minority 13,500 71,551 interests – – – 450,000 450,000 – – – (10,080,000) (10,080,000) Dividend 11 – (10,080,000) Dividend paid to a minority shareholder of a subsidiary – – – (912,369) (912,369) Issue of ordinary shares, pursuant to ESOS – – 85,051 – 85,051 Share options vested under ESOS 767,651 – 767,651 – 767,651 At 31 May 2007 25,213,500 16,492,448 1,063,500 25,084,681 67,854,129 2,529,538 70,383,66744

Statements of Changes In Equity (Cont’d)For the year ended 31 May 2008 Attributable to Equity Holders of the Company Non-distributable Distributable Share Share Other Retained Minority Total capital premium reserves earnings Total interests equity Note (Note 26) (Note 26) (Note 27) RM RM RM RM RM RM RMAt 1 June 2007 25,213,500 16,492,448 1,063,500 25,084,681 67,854,129 2,529,538 70,383,667Foreign currency translation, – – 919,890 – 919,890 – 919,890 representing net income recognised directly in equity – – – (6,798,619) (6,798,619) (206,688) (7,005,307)Loss for the year Total recognised income and – – 919,890 (6,798,619) (5,878,729) (206,688) (6,085,417) expense for the year Acquisition of remaining equity – – – – – 131,559 131,559 in a subsidiary from minority interest – – – – – 3,287,036 3,287,036Contribution to share capital of subsidiaries by minority 551,000 1,818,300 – – 2,369,300 – 2,369,300 interests Issue of ordinary shares, – – 939,820 – 939,820 – 939,820 pursuant to ESOS – 967,556 (967,556) – – – –Share options vested under ESOS Exercise of share options At 31 May 2008 25,764,500 19,278,304 1,955,654 18,286,062 65,284,520 5,741,445 71,025,965 45

Statements of Changes In Equity (Cont’d) For the year ended 31 May 2008 Retained Non-distributable earnings/ Share Share Other (accumulated Total capital premium reserves losses) equity Note (Note 26) (Note 26) (Note 27) RM RM RM RM RM Company At 1 June 2006 25,200,000 16,420,897 – 10,263,902 51,884,799 Loss for the year, representing total – recognised income – and expense for 767,651 the year – – – (514,211) (514,211) Issue of ordinary 13,500 71,551 – 85,051 shares, pursuant to ESOS – – Share options vested – – under ESOS included in investments in subsidiaries – 767,651 Dividend 11 (10,080,000) (10,080,000) At 31 May 2007 25,213,500 16,492,448 767,651 (330,309) 42,143,290 At 1 June 2007 25,213,500 16,492,448 767,651 (330,309) 42,143,290 Loss for the year, representing total – – – (824,574) (824,574) recognised income 551,000 2,785,856 – – 3,336,856 and expense for the year – – 939,820 – 939,820 Issue of ordinary – – (967,556) – (967,556) shares, pursuant 25,764,500 19,278,304 (1,154,883) 44,627,836 to ESOS 739,915 Share options vested under ESOS included in investments in subsidiaries Exercise of share options At 31 May 2008 The accompanying notes form an integral part of the financial statements46

Cash Flow StatementsFor the year ended 31 May 2008 Note Group Company 2008 2007 2008 2007 RM RM RM RMCash flows from operating activities(Loss)/profit before tax from:Continuing operations (8,572,245) 2,496,698 (824,574) (514,211)Discontinued operations 2,576,714 87,985 – –Adjustments for: 273,523 – –Amortisation of intangible assets 7 135,067 191,427 – –Bad debts written off 7 3,486,677 – Depreciation of property, plant – 91 91 and equipment 12 (273,632) 2,799,098 – –Fair value adjustment for (5,139) (26,811) – – investment property 7 179,397 – – –Gain on disposal of a subsidiary 7 3,687,778 15,724 – –(Gain)/loss on disposal of 57,197 – – – property, plant and equipment 7 – – – –Impairment of goodwill 7 (451,678) – – –Impairment of investment in 21,789 associates 7 32,308 (19,664) (108,684)Impairment of property, plant (61,759) (750,779) and equipment 7 268,424 – –Intangible assets written off 16 – – –Interest income – – – –Loss recognised on the 569,225 120,497 – – remeasurement of assets of (141,258) 1,231,298 – – disposal group 7 (417,580) – –Negative goodwill recognised 1,551 875,668 – – in profit and loss 4 939,820 6,201 – –Property, plant and equipment 767,651 written off 7 (844,147) (622,804)Impairment of investment in marketable securities 7 Provision for/(reversal of) doubtful debts, net 7 Share of (loss)/profit from associate Share of profit from joint venture Share option vested under ESOS 5 Operating profit/(loss) before 2,701,970 7,418,866 working capital changes carried forward 47

Cash Flow Statements (Cont’d) For the year ended 31 May 2008 Group Company Note 2008 2007 2008 2007 RM RM RM RM Cash flows from operating activities (cont’d) Operating profit/(loss) before working capital changes brought forward 2,701,970 7,418,866 (844,147) (622,804) Short term accumulating 52,126 (25,177) – – compensation absences 5 – – Unrealised foreign exchange loss 2,416,008 4,125,611 Operating profit/(loss) before 5,170,104 11,519,300 (844,147) (622,804) working capital changes 204,147 291,967 – – Decrease in inventories 995,802 (Increase)/decrease in trade (50,399,459) (1,404,389) 11,751,871 and other receivables 51,989,407 (7,317,115) 18,397 (187,810) Increase/(decrease) in trade and other payables Cash generated from/(used in) 6,964,199 5,489,954 (2,230,139) 10,941,257 operations (1,193,283) (433,069) – – Taxes paid Net cash generated from/ 5,770,916 5,056,885 (2,230,139) 10,941,257 (used in) operating activities Cash flows from investing activities Additional investments in (1) – subsidiaries 451,678 750,779 – (1,049,900) Interest income received (3,394,676) (1,077,793) 19,664 108,684 Investment in associates (1,500,000) – Investment in joint venture – (271,094) – – Acquisition of subsidiaries (64,683) (912,369) – – Dividend paid to minority interest (100,000) – Proceeds from disposal of – – – 145,613 – property, plant and equipment 280,840 273,911 – – Net proceeds from disposal of a – subsidiary 9 – – – – Purchase of marketable securities (5,705,502) (605,814) – Purchase of property, plant (9,162,154) and equipment (7,846,241) – (941,216) Expenditure of intangible assets – (1,534,736) – Purchase of other investment – (600,000) Net cash used in investing (17,448,885) (13,323,357) (80,336) activities 48

Cash Flow Statements (Cont’d)For the year ended 31 May 2008 Note Group Company 2008 2007 2008 2007 RM RM RM RMCash flows from financing activitiesCash received from minority 3,287,036 450,000 – – interest – (10,080,000) – (10,080,000)Dividend paid 2,369,300 Proceeds from issuance of 2,369,300 85,051 85,051 ordinary shares Net cash generated from/ 5,656,336 (9,544,949) 2,369,300 (9,994,949) (used in) financing activities Net (decrease)/increase in (6,021,633) (17,811,421) 58,825 5,092 cash and cash equivalents Effects of exchange rate 1,736,645 1,729,990 – – changes 25,346,393 41,427,824 53,320 48,228Cash and cash equivalents at beginning of year Cash and cash equivalents 21,061,405 25,346,393 112,145 53,320 at end of year Cash and cash equivalents comprise: 2008 Group Company RM 2007 2008 2007 RM RM RM 124,031 88,455 112,037 53,312Short-term investments (Note 22) 16,257,671 17,574,867 108 8Cash on hand and at bank (Note 23) – –Deposits with licensed banks (Note 23) 4,679,703 7,683,071 21,061,405 25,346,393 112,145 53,320The accompanying notes form an integral part of the financial statements 49